Disney's Newest Strategic Move

| About: The Walt (DIS)
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Disney (DIS) has always been known for bringing magic to families in a way that no other company has been able to successfully duplicate. The characters, stories, and imagination that are embedded in this company make it one of a kind. They currently have parks in the United States, Tokyo, Paris, and Hong Kong, making the company a worldwide sensation. The next step is always on the minds of the creators at Disney and recent additions to the Walt Disney World Resort in Florida are no exception to the quality and vision of Disney.

What Are They Adding to Fantasyland?

Out of all of the parks within the Walt Disney World Resort in Florida, the Magic Kingdom is the most recognizable and iconic. Within the Magic Kingdom, there are six different lands to explore, one of which is called Fantasyland. This section of the park is most attractive to the younger children boasting rides such as The Flying Dumbo Ride, Cinderella's Castle, and the Spinning Tea Cups from Alice in Wonderland. Disney has recently unveiled a very large addition to this section of the park to attract even more guests. This new addition to Fantasyland includes two main areas named the Enchanted Forest and the Storybook Circus. The Enchanted Forest brings to life elements from The Little Mermaid and Beauty and the Beast with a restaurant themed from each movie, a new ride, and also places to meet characters from the movies. The Storybook Circus part of the new area includes two new rides, and a circus themed water play area. This first expansion is just the beginning of the largest expansion of the Magic Kingdom to date. Through 2014, Disney plans to double the size of Fantasyland and add to the value of the park.

What is Disney Springs?

Downtown Disney is a section of the Walt Disney World resort in Florida that adds a special element to the park. It has created a separate shopping and entertainment experience for people visiting the park. There is everything from an indoor interactive theme park to the House of Blues, so that both adults and kids alike are sure to have a good time. It was recently announced that a large expansion to Downtown Disney called Disney Springs will start construction soon. The goal of Disney Springs is to take the success of Downtown Disney to the next level. The plan is to have four separate areas within the new expansion. These areas will be called The Landing, The Marketplace, West Side, and the Town Center. The Landing is planned to be a commercial site with waterfront views and fine dining. The West Side will be mostly an entertainment district with elevated spaces to overlook the area below. The Marketplace will include an over-the-water pedestrian causeway and an expanded World of Disney Store. Last but not least, the Town Center district will include a mix of shopping and dining.

How Does This Play into Their Strategy?

Disney's strategy has always been to bring quality entertainment to people of all ages. These new expansions add value to both ends of the age spectrum. The vast majority of the parks in Disney are targeted at the younger crowd with attractions here and there to please older children and adults. Disney Springs is a solid step in the right direction to attract the older crowd. Currently, there are limited places that adults can let loose or even get an alcoholic drink in the parks. For a while, the Pleasure Island section of Downtown Disney was a place where adults could go to several nightclubs and have some nightlife at Disney. However, in 2008, all of these nightclubs closed down and since none have reopened for business. Disney Springs will be a great addition to attract more of the adult market. The new additions to Fantasyland certainly do not hurt their already sterling reputation with the children's market. As long as Disney keeps adding more places for children to go and explore, there will always be more reasons for kids asking their parents to go back to Disney World.

The Outcome

Disney is a financially sound company that continues to add value to their brand and company. Over the past ten years, their revenue has grown on average 4.93%, and their net income over the past five years has grown on average of 7.34%. The debt to equity ratio has never been above 0.5 over the past ten years and currently sits at a healthy 0.28, meaning that the expansion of the company is being done in a controlled manner so that large amounts of debt are not being used to finance improvements to the park.

Disney is in business for the long haul and if they continue to make improvements without jeopardizing the financial health of the business, earnings will continue to grow. Disney makes calculated decisions on how to position themselves to the world and has done so quite well over the past 50 years. There is no reason to believe that in the long-term picture, Disney will not continue to grow earnings. They did see a slight decline in profit in 2008 due to economic times forcing people to forgo their summer vacations to Disney, but a year or two after that, revenue was set right back on track. Disney's reach transcends generations and age groups like no other company in the world. The quality and attention to detail is not only noticed but also appreciated by the visitors that grace their gates every year. In the end, this is just another move to expand their target market, increase sales, and continue to grow.

Overall, Disney is on course to grow their earnings over time and increase their intrinsic value to shareholders and customers. If this new move to attract more adults works as planned, this could propel Disney to new heights and allow the company to expand its consumer base even more.

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Business relationship disclosure: This article was written by an analyst at Catalyst Investments.